5. Debt

2013 Loan and Security Agreement

The Company has a revolving line of credit of up to $20.0 million (“Revolving Credit Facility”) under a loan and security agreement with a lender, which was entered into in March 2013 and last amended in December 2014 (“2013 Loan and Security Agreement”). The Revolving Credit Facility carries a variable annual interest rate of the prime rate plus 0.50% and matures on December 1, 2016.

The 2013 Loan and Security Agreement is collateralized by substantially all the assets of the Company. The balance outstanding cannot exceed the lesser of (i) $20.0 million or (ii) an amount equal to the Company’s monthly recurring revenue for the three months prior multiplied by the average Dollar-Based Retention Rate over the prior twelve months, less the amount accrued for the Company’s Universal Service Fund (“USF”) obligation (accrued federal fees). As of March 31, 2016 and December 31, 2015, the outstanding principal balance under the Revolving Credit Facility was $12.5 million, which has been disclosed as a current liability, and the amount available for additional borrowings was $7.5 million.

In connection with its acquisition of SoCoCare in October 2013, the Company also borrowed $5.0 million under a term loan (the “Term Loan”) under the 2013 Loan and Security Agreement in October 2013. Monthly interest-only payments were due on the advance at the prime rate plus 1.50% through September 2014. Principal and interest payments are due in equal monthly installments from October 2014 through the maturity of the Term Loan in March 2017. As of March 31, 2016 and December 31, 2015, approximately $2.0 million and $2.5 million, respectively, in principal amount of this Term Loan was outstanding and is included as notes payable in the condensed consolidated balance sheets.

The 2013 Loan and Security Agreement contains certain covenants, including the requirement that the Company maintain $7.5 million of cash deposited with the lender for the term of the 2013 Loan and Security Agreement. The Company was in compliance with these covenants as of March 31, 2016. The 2013 Loan and Security Agreement remains senior to other debt, including the debt issued under the 2014 Loan and Security Agreement discussed below.

2014 Loan and Security Agreement

The Company had a term loan facility of $30.0 million with a syndicate of two lenders (“Lenders”), which was entered into in February 2014 and amended in December 2014 and February 2015 (the “2014 Loan and Security Agreement”). The term loan facility was available to the Company in tranches. The first tranche for $20.0 million was advanced upon the closing of the agreement. The remaining $10.0 million was available for drawdown by the Company until February 20, 2016 in $1.0 million increments, which has now expired. The Company incurred $0.4 million in debt costs in connection with borrowing the first tranche in February 2014. The term loan bears interest at a variable per annum rate equal to the greater of 10% or LIBOR plus 9%. Interest is due and payable on the last business day of each month during the term of the loan commencing in February 2014. Monthly principal payments are due beginning in February 2016 based on 1/60th of the outstanding balance at that time and will continue until all remaining principal outstanding under the term loan becomes due and payable in February 2019. As of March 31, 2016 and December 31, 2015, respectively, $19.3 million and $20.0 million of this loan facility was outstanding and is included as notes payable in the condensed consolidated balance sheets.

The term loan is secured by substantially all the assets of the Company and is subordinate to the 2013 Loan and Security Agreement. The 2014 Loan and Security Agreement contains certain covenants and includes the occurrence of a material adverse event, as defined in the agreement and determined by the Lenders, as an event of default. As of March 31, 2016, the Company was in compliance with these covenants.

In connection with entering into the 2014 Loan and Security Agreement, the Company issued to the Lenders warrants to purchase 177,865 shares of common stock at $10.12 per share, which vest and become exercisable over a ten year term from the date of issuance, based on amounts drawn under the $30.0 million term loan facility. Based on the drawdown of $20.0 million in February 2014, 118,577 shares of common stock issuable under the warrants vested and are exercisable by the Lenders. The remaining 59,288 shares of common stock issuable under the warrants pertaining to the undrawn $10.0 million did not vest and were no longer exercisable on February 20, 2016 when the $10.0 million was no longer available for borrowing.

Promissory Note

In July 2013, the Company issued a promissory note to the Universal Service Administrative Company ("USAC") for $4.1 million as a financing arrangement for that amount of accrued federal fees. The promissory note carries a fixed annual interest rate of 12.75% and is repayable in 42 equal monthly installments of principal and interest beginning in August 2013. As of March 31, 2016 and December 31, 2015, approximately $1.1 million and $1.5 million, respectively, of this promissory note was outstanding and is included as notes payable in the accompanying condensed consolidated balance sheets.

FCC Civil Penalty

In June 2015, the Company entered into a consent decree with the Federal Communications Commission ("FCC") Enforcement Bureau (Note 9), in which the Company agreed to pay a civil penalty of $2.0 million to the U.S. Treasury in twelve equal quarterly installments starting in July 2015 without interest. As a result, the Company discounted the $2.0 million liability, which was accrued in the third quarter of 2014 for the then tentative civil penalty, to its present value of $1.7 million at an annual interest rate of 12.75% to reflect the imputed interest and reclassified this discounted liability from 'Accrued federal fees' to 'Notes payable.' The $0.3 million discount was recorded as a reduction to general and administrative expense in the three months ended June 30, 2015 and is being recognized as interest expense over the payment term of the civil penalty. As of March 31, 2016 and December 31, 2015, the outstanding civil penalty payable was $1.5 million and $1.7 million, respectively, of which the net carrying value was $1.3 million and $1.4 million, respectively, and are included as 'Notes payable' in the accompanying condensed consolidated balance sheets.

As of March 31, 2016 and December 31, 2015, the Company’s outstanding debt is summarized as follows (in thousands):



	March 31, 2016			December 31, 2015
Term loan under 2014 Loan and Security Agreement	$	19,333		$	20,000
Term loan under 2013 Loan and Security Agreement	2,000			2,500
Promissory note to USAC	1,140			1,459
FCC civil penalty	1,500			1,667
Total notes payable, gross	23,973			25,626
Less: discount	(954		)	(1,087		)
Total notes payable, net carrying value	23,019			24,539
Revolving line of credit	12,500			12,500
Total debt, net carrying value	$	35,519		$	37,039
Less: current portion of debt *	(19,875		)	(19,712		)
Total debt, less current portion **	15,644			17,327


* Included in ‘Revolving line of credit’ and ‘Notes payable’ in the condensed consolidated balance sheets.
** Included in ‘Notes payable - less current portion’ in the condensed consolidated balance sheets.

Maturities of the Company’s outstanding debt as of March 31, 2016 are as follows (in thousands):



Period	Amount to Mature
Remainder of 2016	$	18,520
2017	5,286
2018	4,334
2019	8,333
Total	$	36,473